The need of intangible valuation has become more important nowadays. The appraisal and analysis of intangible assets has evolved from the academic discipline of economics. Practitioners involved in the valuation address complicated questions about the intangible assets.
What is intangible assets? And what is the requirement for an asset to be qualified as intangible assets? Some of the common characteristics or attribute necessary for qualification as an intangible assets are:
- it should be subject to specific identification and recognizable description;
- it should be subject to legal existence and protection;
- it should be subject to the right of private ownership, and private ownership should be legally transferable;
there should be some tangible evidence or manifestation of the intangible asset (e.g., a contract, a license, a registration document, a computer diskette, a listing of customers, a set of financial statements, etc.);
- it should have been created or have come into existence at an identifiable time or as the result of and identifiable event;
- it should be subject to being destroyed or to a termination of existence at and identifiable time or as the result of an identifiable event;
- it should be subject to being destroyed or to a termination of existence at an identifiable time or as the result of an identifiable event.
But not all economics phenomena can be qualified as intangible assets, such as:
- market share;
- high profitability
- lack of regulation;
- a regulated (or protected) position;
- monopoly position (or barriers to entry);
- market potential;
- breadth of appeal;
- heritage or longevity;
- competitive edge
- life0cycle status;
- discount prices;
- liquidity (or illiquidity);
- ownership control (or lack of control).
Those are examples of intangible factors that do not qualify as intangible assets.
FOUR CATEGORIES OF PROPERTY
For valuation purposes and economic analysis, all assets or properties may be categorized into on of the following categories:
- Tangible real estate;
- Intangible real property;
- Tangible personal property;
- Intangible personal property
The legal definition of real estate includes land and all things that are a natural part of the land as well ass all things that are permanently affixed to it by people (e.g., buildings, fences, site improvements) and all permanent building attachments (plumbing, electrical wiring, etc) as well as built in items are considered part of the real estate only if the are permanently attached to a structure. Real estate includes all attachments to the land, both below and above the ground.
Personal Property is defined as those tangible items that are not permanently affixed to real estate and can be moved. A general definition of personal property is anything and everything, excepting intangibles, that is not realty and/or not permanently attached to the realty.
If Real Estate is the name associated with the tangible assets land, land improvements, buildings, and building improvements, real property represents the individual legal rights associated with ownership of the tangible real estate. For example, real property ownership rights may include, among others:
- the right to use the real estate;
- the right to sell the real estate;
- the right to lease the real estate;
- the right to control access to the real estate;
- the right to give the real estate away;
- the right to choose to excersie all of or none of these rights.
Intangible personal property assets are not physically attached to the land or to other real estate because its is personal.